Correlation Between Magnolia Oil and Evolution Petroleum

Can any of the company-specific risk be diversified away by investing in both Magnolia Oil and Evolution Petroleum at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Magnolia Oil and Evolution Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Magnolia Oil Gas and Evolution Petroleum, you can compare the effects of market volatilities on Magnolia Oil and Evolution Petroleum and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Magnolia Oil with a short position of Evolution Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magnolia Oil and Evolution Petroleum.

Diversification Opportunities for Magnolia Oil and Evolution Petroleum

0.89

Correlation Coefficient

Magnolia Oil  Evolution Petroleum

Very poor diversification

The 3 months correlation between Magnolia and Evolution is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Magnolia Oil Gas and Evolution Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution Petroleum and Magnolia Oil is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Magnolia Oil Gas are associated (or correlated) with Evolution Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolution Petroleum has no effect on the direction of Magnolia Oil i.e., Magnolia Oil and Evolution Petroleum go up and down completely randomly.

Pair Corralation between Magnolia Oil and Evolution Petroleum

Considering the 90-day investment horizon Magnolia Oil Gas is expected to generate 1.57 times more return on investment than Evolution Petroleum. However, Magnolia Oil is 1.57 times more volatile than Evolution Petroleum. It trades about 0.01 of its potential returns per unit of risk. Evolution Petroleum is currently generating about -0.03 per unit of risk. If you would invest  2,211  in Magnolia Oil Gas on March 1, 2025 and sell it today you would lose (22.00) from holding Magnolia Oil Gas or give up 1.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Magnolia Oil Gas  vs.  Evolution Petroleum

Magnolia Oil Gas

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Magnolia Oil Gas are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Magnolia Oil is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Evolution Petroleum

Risk-Adjusted Performance

Very Weak

Over the last 90 days Evolution Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Evolution Petroleum is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Magnolia Oil and Evolution Petroleum

The main advantage of trading using opposite Magnolia Oil and Evolution Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magnolia Oil position performs unexpectedly, Evolution Petroleum can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Evolution Petroleum will offset losses from the drop in Evolution Petroleum's long position.

The idea behind Magnolia Oil Gas and Evolution Petroleum pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.